The Keynesian sticky wage model predicts that there is a negative relationship between the quantity of Keynesian unemployment and the deviation of real output from potential. Suppose that Keynesian unemployment is measured as the deviation from trend in the unemployment rate, and the deviation of output from potential is the percentage deviation of real GDP from trend.

a) Plot the deviation from trend in the unemployment rate and the percentage deviation from trend in real GDP in a scatter plot.

b) What do you observe in the scatter plot? Is this consistent with what the Keynesian sticky wage model predicts? Explain

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